Is the relationship between financial development and income inequality symmetric or asymmetric ? new evidence from South Africa based on NARDL

Haffejee, muhammad Ismail and Masih, Mansur (2018): Is the relationship between financial development and income inequality symmetric or asymmetric ? new evidence from South Africa based on NARDL.

Abstract

Income inequality in South Africa has been increasing from a Gini-coefficient height of 0.57 in 2000 to 0.65 in 2014. It is therefore important to investigate whether, in a developing economy, financial sector development reduces or worsens income inequality by mobilising and allocating savings into productive investments. For this purpose, South Africa, with arguably the second-largest economy in Africa, has been identified. The Non-linear Auto Regressive Distributed Lag (NARDL) technique advanced by Shin et. al. (2014) has been applied. This paper contributes to existing literature both in terms of being country-specific as well as demonstrating for the first time, to the best of our knowledge, that there is no long-run asymmetry between financial development and income inequality. Our conclusions support the pressing need for double-digit economic growth in South Africa together with moderate increase in government consumption expenditures.

• Item Type: MPRA Paper
• Language: English
• Keywords: Financial development, Income Inequality, South Africa, NARDL
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes; C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C58 - Financial Econometrics; G - Financial Economics > G2 - Financial Institutions and Services > G23 - Non-bank Financial Institutions ; Financial Instruments ; Institutional Investors

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